By 2030, most of the $6 trillion in forecast superannuation savings will belong to ageing Baby Boomers and Gen Xers. What investment and financial advice services will they seek in their long retirements? SIMON MUMME reports.  

Retirees’ assets are forecast to be 22 per cent of super savings by 2030, according to the Deloitte report, The Dynamics of the Australian Superannuation System: the next 20 years, 2011-2030. This equates to $1.32 trillion – roughly the same amount of capital in the super system today.

The Deloitte report, released on November 2, says that 84 per cent of superannuation assets in 2030 will belong to people in the Generation X demographic group, who will then be approaching retirement. Remaining Baby Boomer savings will account for much of the rest. Russell Mason, head of superannuation at Deloitte, says both groups will generally seek conservative investment strategies and some form of capital protection.

The sole purpose of superannuation will be clear to everybody as fund members use their savings to pay health care costs and support their lifestyles. Super funds, in their efforts to help people manage their savings wisely and win market share, will provide investment products and financial advice in response to people’s needs. Many funds are preparing for this challenge now.

Today, a person needs $22,000 each year for a modest lifestyle in retirement, according to the Retirement Standard maintained by the Association of Superannuation Funds of Australia. Given current life expectancies, this means a total cost of $280,000 for men and $310,000 for women, due to their higher average longevity, Mason says.

But Deloitte believes half of today’s population will live beyond the current life expectancies of 85 years for men and 88 years for women. If this is correct, a man who retires with superannuation assets of $217,000 and spends $22,000 each year has a 78 per cent likelihood of outliving his savings, says Stephen Huppert, actuaries and consultants’ partner at Deloitte and co-author of the report.

Many Australians don’t have enough super to fund their retirements and will rely on the age pension as a back-up source of income for the foreseeable future, Huppert says. Inadequate levels of super savings, combined with stock market volatility, makes it likely that many people will use the superannuation and social security systems in tandem to fund long retirements.


From lump sum to income


Huppert says more retirees will convert their balances into income streams rather than withdraw them as “lump sums”. Super funds, which provide a range of investment options, including allocated pensions, can expand the range of income strategies they offer – particularly for retirees with large balances.

“One of the most important needs of retirees is certainty when they convert lump sums into income,” says Marc Lieberman, chief executive officer of MetLife in Australia. “The comfort of reasonably priced guaranteed income for life will be a driving force, especially for retirees with balances of more than $100,000, who are well positioned to generate meaningful income from such products.”

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